SINGAPORE: Singapore-based Grab Holdings, Southeast Asia’s leading ride-hailing and food delivery app, is cutting 1,000 jobs, or 11% of its workforce, its CEO said on Tuesday, citing the need to manage costs and ensure more affordable services long-term.
In a letter sent to employees late on Tuesday and seen by Reuters, chief executive Anthony Tan said the cuts, the biggest by the super-app operator since the start of the pandemic, were not “a shortcut to profitability” but a strategic reorganisation to adapt to a fast-changing business environment.
“Change has never been this fast. Technology such as generative AI (artificial intelligence) is evolving at breakneck speed. The cost of capital has gone up, directly impacting the competitive landscape,” Tan said in the letter.
“We must combine our scale with nimble execution and cost leadership, so that we can sustainably offer even more affordable services and deepen our penetration of the masses.”
Tan said that even without layoffs, Grab had been managing costs and should hit its target to break even for group adjusted Ebitda (earnings before interest, depreciation and amortisation) this year.
The layoffs follow a similar move last year by the Indonesian tech company GoTo, which offers rides, e-commerce and financial services. It has undergone strict cost-cutting, including cutting 12% of its workforce in 2022. It laid off a further 600 staff in March.
Its incoming CEO is planning to head the company only temporarily and intends to quit after improving profitability, sources told Reuters last week.
Grab, founded in 2012, offers deliveries, rides and financial services in eight Southeast Asian countries, including Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.
While Grab leads the ride-hailing and delivery markets in Southeast Asia, it has yet to turn a profit as it spends on growth and competition from rivals such as GoTo Group of Indonesia weighs on prices.
Shares of Grab have slumped about 70% since its stock-market debut in New York in late 2021, even as it has reduced its losses and pledged to report a profit on an adjusted basis by the final quarter of this year.
Rivals cutting costs faster
The cuts suggest Grab is succumbing to investor pressure for faster cost reduction. Grab has been slower to slash expenses than regional competitors. As GoTo and Singapore-based Sea Ltd, the parent of Shopee, eliminated thousands of jobs last year, Grab refrained from mass layoffs. It added more than 3,000 staff in 2022, largely because of its acquisition of the supermarket chain Jaya Grocer.
Grab is also facing potentially slowing growth as customers grapple with a higher rate of inflation and rising interest rates. While the company reported a narrower quarterly loss last month, it said its gross merchandise value grew just 3% in the three months through March. That’s down from 24% for the full-year 2022. User growth also slowed as competitors lured customers with promotions and lower prices.
Grab’s adjusted losses before interest, taxes, depreciation and amortisation in the first quarter narrowed to US$66 million, and analysts are predicting its losses will continue to shrink. On a net income basis, it is further away from profitability. In the first quarter, its net loss narrowed to $244 million from $423 million a year earlier.
Grab Thailand said in May that it aims to break even before the fourth quarter as it sees itself on a path to group profitability through its “One Grab” strategy.
“We expect to break even on our earnings before interest, taxes, depreciation and amortisation before the group target of the fourth quarter because of cautious spending and the rebound of the transport business,” said Worachat Luxkanalode, country head of Grab Thailand.
Locally, the company’s ride-hailing service has rebounded following the pandemic, particularly among tourists. Grab aims to have tourist customers account for 35% of its total transport service soon, the same level as before the pandemic, said Mr Worachat.
He said that in the first four months of this year, the number of travellers who use Grab increased by 25%.
